GM HOLDEN has increased the line rate at its Elizabeth assembly plant in South Australia to 480 vehicles a day with the introduction of the Cruze hatchback launched this week.

However, the company has no plans to increase production further as it battles weakening demand for its Commodore large car and a “very challenging” export business.

The line rate has been at 430 a day since last November, when Holden returned to a second shift in preparation for the Cruze sedan and the VE Series II Commodore after the company scaled back to a single shift and 340 cars a day in April 2010, putting factory workers on reduced hours and pay in an effort to avoid retrenchments.

The increased rate to 480 – which comprises 185 Cruze variants – is still well below the normal two-shift capacity of 620, but Holden said this week that the small car, coupled with large-car-based Chevrolet Caprice Police Patrol Vehicle (PPV) exports to the US, had led to 300 new manufacturing jobs and, with the Australian-designed Cruze hatch, increased in-house component production.

The company says it has also created more than 200 new jobs in the Australian parts sector as a direct result of the Cruze program, and is buying an extra $100 million worth of components a year from Australian suppliers.

GM Holden executive director of sales, marketing and aftersales, John Elsworth, told GoAuto at the Elizabeth plant this week that, while the company has no plans to increase its line rate, it had built flexibility into the production process to produce more Cruzes if Commodore sales, which fell 20.3 per cent last month to be down 8.9 per cent for the year, continued to contract.

He would not comment on whether Cruze production was expected to overtake the Commodore over the next 12 months, but said “it would be pretty similar volumes” and that the company hoped both models could occupy the top two positions in the Australian marketplace.

Commodore is currently first, with Cruze fifth.

“We don’t have plans to increase the overall rate, but the mix within that rate of 480 is what we make decisions on – on a monthly basis,” Mr Elsworth told GoAuto.

“Essentially, what we will do is build what the market wants. That’s the flexibility that we’ve got now in making large cars and small cars – we can react to what the market is doing.

“The small-car market is now the biggest market segment in the nation, and as that market continues to grow we can move more of our production capability and capacity into Cruze.

“The market determines what we’ll make, to be perfectly frank with you. We’re not going to just build Commodores and park them in plant stock ... We are very disciplined about the way we manage our inventory, and if there’s market demand there we’ll just build the appropriate mix that the customers want.”

With the US export program, Mr Elsworth said around 600 Chevrolet PPVs had been sold to date.

Although he would not comment on the production schedule or whether the program was running at a loss, Mr Elsworth emphasised that the strong Australian dollar made it “very challenging” in financial terms.

“It is a very challenging time to be exporting cars, especially when you’re talking about police cars because it’s all business done at tender, and to be quite honest with you you’re selling to government departments who are after pretty sharp pricing,” he said.

“So it is a very challenged part of our business at the minute, exporting cars to America. Also when you consider we are competing against American-made products in the (Ford) Taurus and (Dodge) Charger.

“Is it above or below (expectations)? To be quite honest with you, we didn’t really ... it would be in line with our expectations; I’ll leave it at that.”

Mr Elsworth said there was scope for more local parts to be employed on the Cruze sedan and hatch now that ‘phase one’ with initial Australian specifications was completed.

Holden has created 13 new pieces of equipment for the Elizabeth plant to enable in-house manufacturing of specific components for the Cruze hatch, including rear fascia assemblies, rear tailgate trim, body sides and roof.

Geelong-based MHG Glass is among the new suppliers engaged specifically for the Cruze hatch, to supply the new tailgate glass, while established supplier Futuris Automotive is delivering seats and Hirotec Australia is stamping the closures for both sedan and hatch, including doors, bonnet and bootlid.

Federal industry minister Kim Carr, who was also at the Elizabeth plant this week, said the number of parts-makers on the so-called ‘distressed list’ had dropped “dramatically” with the introduction of the Australian Cruze program.

“I’m not certain General Motors Holden would like me to reveal the precise numbers, but it is an extraordinary turnaround,” Senator Carr said.

“The volumes have increased and the opportunities for investment and for production have grown dramatically for the suppliers, even though many at the time said the level of local content was too low.

“So there’s two things happening here: one, the total size of the production opportunities has grown from the depths of despair that we faced in 2008; and, secondly, opportunities for further localisation have also improved.

“Some would have preferred us to get out of the automotive business altogether in Australia, which is not the view of the government, and not the view of the many tens of thousands of Australians who are actually directly employed in this industry.”

Holden now builds 51 model variants at Elizabeth, including six body styles, across its small- and large-car vehicle architectures.

Mr Elsworth said: “We know, as do you, that complexity isn’t quality’s best friend, so it really is a challenge for us every day. But flexibility is a key for us and we have to find the right balance.”